TIDMSXS
RNS Number : 8179I
Spectris PLC
06 April 2020
COVID-19 and business update
6 April 2020 - Spectris plc (SXS: LSE), the expert in providing
insight through precision measurement, provides an update on the
impact of COVID-19 on its current activities and the actions it is
taking.
Andrew Heath, Chief Executive, said :
"Spectris has entered this crisis with a strong balance sheet
and liquidity position, committed sources of funding and the
benefit of cost actions taken in 2019.
"I would like to thank all our colleagues for their dedication
in keeping our operations open and reaffirm our commitment to
supporting them and our customers through this challenging period.
Our focus is on ensuring the health and well-being of our
employees, as well as preserving as many jobs as possible and
minimising the impact on our people.
"Despite these uncertain times, the combination of the quality
of our employee base, our strong market positions, our diverse end
markets and customer exposure as well as our robust balance sheet
and liquidity position mean the Group is well positioned to
withstand this period of uncertainty. We are having to take a
number of difficult decisions but are working to emerge from this
crisis in a position of strength."
Summary
-- Priority on protecting our people, supporting our customers
and ensuring we emerge in a strong position from the crisis
-- Manufacturing facilities remain operational, with measures in place to protect our people
-- First quarter trading impacted by COVID-19, like-for-like sales expected to be down 10%
-- Many mitigating actions already implemented. Working to
preserve as many jobs as we can. Further cost action being
developed
-- Strong balance sheet and liquidity position
-- Special dividend withdrawn; final dividend postponed
-- Financial guidance withdrawn given current circumstances;
will be revisited when appropriate
Protecting our people and supporting our customers
First and foremost, our priority is to safeguard the health,
safety and well-being of our employees, their families and the
communities we operate in. We are following the advice of the World
Health Organization, regional and national governments, and health
authorities and have instituted a number of measures to meet this
goal. These measures include social distancing and split shifts
within our facilities, along with enhanced cleaning and
disinfection processes, the introduction of temperature screening
in certain regions, a work from home policy and a ban on all
non-essential travel.
We are also focused on continuing to support our customers by
providing them with the products, services and any assistance they
need, particularly at this challenging time. We are committed to
meeting production demand, while ensuring our people are protected,
to the extent possible.
As of today, all our manufacturing sites around the world
continue to operate. Many have been deemed essential by
governments, as they serve a wide range of critical end markets,
including pharmaceutical, energy, infrastructure management and
food manufacturing, as well as critical process controls in
manufacturing. Several of our operating companies are providing
equipment for the production of vital and urgently required
ventilator equipment during this crisis.
Our Chinese factories have now returned to full operation.
However, elsewhere, our manufacturing facilities are working below
full capacity as a number of employees self-isolate at home. While
all our sites are currently open, we will not hesitate to close
them for employee safety reasons or in compliance with government
guidance.
Our crisis management teams continue to ensure we support both
our people and our customers, through the ongoing operation of our
facilities and supply chains. We are communicating regularly with
our people to keep them informed as the situation evolves.
Update on trading
The year started broadly in line with expectations, except in
China, where LFL sales were notably lower in February, although we
have seen activity in China pick up in March as customers'
factories reopened.
Elsewhere, during March, we saw a deterioration in orders, most
notably in Europe and North America as lockdowns started. Sales
also deteriorated as access to our customers' facilities, to
install equipment and provide services, has been restricted,
compounded by emerging logistics issues. As a result, Group sales
in the first quarter are expected to be 10% lower than the prior
year on a like-for-like basis.
Mitigating actions
Given the high level of uncertainty and the low level of
visibility regarding current and future trading, we have already
taken a number of actions to mitigate the economic impact on the
Group.
A headcount freeze has been implemented, along with halting the
planned inflation-related salary increases across the Group. Where
appropriate, compulsory paid holidays are being enacted and we are
reducing discretionary spending and capex. The Chief Executive and
Chief Financial Officer are taking a voluntary 25% salary
reduction, effective 1 April 2020, until further notice. The
Chairman's and
Non-executive Directors' fees have also voluntarily been reduced
by this amount.
Additional cost-savings measures are also being considered and
developed. The profit improvement programme initiatives that were
already underway continue. We are seeing reduced costs from the
2019 programme activities, with the additional benefits from the
2020 initiatives being supplemented with these further actions.
We are mindful of our corporate and social responsibility at
this unprecedented time and one of our key priorities is to
preserve as many jobs as possible and minimise the impact on our
employees. We have a high-quality workforce and we will work to
best retain their experience and capabilities to ensure that we
emerge in a position of strength from this crisis. We will draw on
government wage replacement schemes, where these exist, and it is
appropriate to do so, along with asking our people to be flexible
around working arrangements.
Balance sheet
The Group entered 2020 with a strong balance sheet and is highly
cash generative. At the end of March, we had net cash of
approximately GBP53 million, with a cash balance of c. GBP240
million and gross borrowings of GBP187 million.
The Group has GBP831.7 million of committed banking facilities,
as follows:
-- an $800.0 million (GBP644.3 million) revolving credit
facility (RCF), currently undrawn, maturing in
July 2024 with a one-year extension option, subject to approval
by the lenders;
-- a seven-year EUR94.8 million (GBP84.2 million) term European
Investment Bank (EIB) loan maturing in October 2020; and
-- a seven-year EUR116.2 million (GBP103.2 million) term EIB loan maturing in September 2022.
These facilities have a leverage (net debt/EBITDA) covenant of
up to 3x for the EIB loans and up to 3.5x for the RCF. In addition
to the above, the Group also has access to a number of uncommitted
and bank overdraft facilities.
Despite this robust position, maintaining a strong balance sheet
and conserving cash is a key priority for the Group during this
period of uncertainty. Consequently, the Board has determined that
it is in the Company's best interests, having regard to all our
stakeholders' interests, to withdraw the proposed GBP175 million
special dividend (150 pence per share). The Board has also
determined that it is appropriate to postpone the proposed 2019
final dividend of 43.2 pence per share. Both payments were due to
be approved at the forthcoming Annual General Meeting. This results
in a cash saving of approximately GBP225 million. We recognise the
importance of the dividend to our shareholders but believe these
actions to be responsible in the current circumstances. We will
reassess the position with regard to the final dividend later in
the year.
Financial guidance
The Group remains in a strong position. Clearly, the full impact
of COVID-19 on orders and sales is difficult to predict and given
this level of uncertainty, the Group is unable to accurately
forecast the outlook for the remainder of the year at this time. We
are therefore withdrawing forward financial guidance for 2020,
until the situation is clearer.
Contacts:
Spectris plc
Siobhán Andrews
Head of Corporate Affairs
+44 1784 485325
FTI Consulting
Richard Mountain/Susanne Yule
+44 203 727 1340
About Spectris
Spectris' global group of businesses are focused on delivering
value beyond measure for all our stakeholders. We target global,
attractive and sustainable markets, where growth and high returns
are supported by long-term drivers. Precision is at the heart of
what we do. We provide customers with expert insight through our
advanced instruments and test equipment, augmented by the power of
our software and services. This equips customers with the ability
to reduce time to market, improve processes, quality and yield. In
this way, Spectris know-how creates value for our wider society, as
our customers design, develop, test and manufacture their products
to make the world a cleaner, healthier and more productive place.
Headquartered in Egham, Surrey, United Kingdom, the Company employs
approximately 9,000 people located in more than 30 countries. For
more information, visit www.spectris.com .
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